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Amid an A.I. Chip Shortage, the GPU Rental Market Is Booming | Observer
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ad-leaderboard ad-has-disclaimer htlad-observer_leaderboard_atf" id="observer_leaderboard_atf"></div> <!--a wrapper to include the content + sidebar--> <div id="single-post-wrapper"> <div id="primary" class="content-area"> <main id="main" class="site-main" role="main"> <div class="article-wrap"> <article id="post-1460369" class="post-1460369 post type-post status-publish format-standard has-post-thumbnail tag-semiconductors observer_company-amazon-web-services observer_company-deepmind observer_company-nvidia observer_company-openai channel-business channel-artificial-intelligence channel-startups channel-technology nyo_person-david-bader nyo_person-jake-cannell" data-post="" data-title="Amid an A.I. Chip Shortage, the GPU Rental Market Is Booming" data-url="" data-page-url="/2024/10/ai-gpu-rental-startup/" data-date="2024-10-23 16:35:48" data-date-iso="2024-10-23T16:35:48-04:00" data-author="Aaron Mok" data-coauthors="Aaron Mok" data-channels="Business, Artificial Intelligence, Startups, Technology" data-piped-channels="Business|Artificial Intelligence|Startups|Technology" > <header class="entry-header"> <div class="entry-teaser"> <a href="https://observer.com/business/" aria-label="Read more articles on Business">Business</a><span> • </span><a href="https://observer.com/startups/" aria-label="Read more articles on Startups">Startups</a> </div> <h1 class="entry-title" itemprop="headline">Amid an A.I. Chip Shortage, the GPU Rental Market Is Booming</h1> <h2 class="dek">For many organizations aspiring to develop A.I. projects, GPU-as-a-service provides a cost-effective way to access high-performance chips.</h2> <div class="entry-meta nyo-social-comments nyo-social-comments-above"> By <span class="author" itemprop="author"><a rel="author" class="url fn n" href="https://observer.com/author/aaron-mok/" title="View All Posts by Aaron Mok">Aaron Mok</a></span> • <span class="entry-date"><time itemprop="datePublished" datetime="2024-10-23">10/23/24 4:35pm</time></span> <svg aria-hidden="true" style="position: absolute; width: 0; height: 0; overflow: hidden;" version="1.1" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"> <defs> <symbol id="icon-envelope" viewBox="0 0 28 28"> <path d="M26 23.5v-12c-0.328 0.375-0.688 0.719-1.078 1.031-2.234 1.719-4.484 3.469-6.656 5.281-1.172 0.984-2.625 2.188-4.25 2.188h-0.031c-1.625 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Chip Shortage, the GPU Rental Market Is Booming&body=https://observer.com/2024/10/ai-gpu-rental-startup/" target="_blank" title="Send email"> <svg class="social-icon icon-envelope"><use xlink:href="#icon-filled-envelope"></use></svg> </a> </li> </ul> </div><!-- .entry-meta --> </header><!-- .entry-header --> <div class="entry-content" itemprop="articleBody"> <figure id="attachment_1460373" aria-describedby="caption-attachment-1460373" style="width: 635px" class="wp-caption aligncenter"><img fetchpriority="high" decoding="async" class="size-full wp-image-1460373" src="https://observer.com/wp-content/uploads/sites/2/2024/10/igor-omilaev-eGGFZ5X2LnA-unsplash.jpg?quality=80" alt="AI chip illustration" width="635" height="529" srcset="https://observer.com/wp-content/uploads/sites/2/2024/10/igor-omilaev-eGGFZ5X2LnA-unsplash.jpg 3000w, https://observer.com/wp-content/uploads/sites/2/2024/10/igor-omilaev-eGGFZ5X2LnA-unsplash.jpg?resize=300,250 300w, https://observer.com/wp-content/uploads/sites/2/2024/10/igor-omilaev-eGGFZ5X2LnA-unsplash.jpg?resize=768,640 768w, https://observer.com/wp-content/uploads/sites/2/2024/10/igor-omilaev-eGGFZ5X2LnA-unsplash.jpg?resize=635,529 635w, https://observer.com/wp-content/uploads/sites/2/2024/10/igor-omilaev-eGGFZ5X2LnA-unsplash.jpg?resize=1536,1280 1536w, https://observer.com/wp-content/uploads/sites/2/2024/10/igor-omilaev-eGGFZ5X2LnA-unsplash.jpg?resize=2048,1707 2048w, https://observer.com/wp-content/uploads/sites/2/2024/10/igor-omilaev-eGGFZ5X2LnA-unsplash.jpg?resize=970,808 970w, https://observer.com/wp-content/uploads/sites/2/2024/10/igor-omilaev-eGGFZ5X2LnA-unsplash.jpg?resize=320,267 320w, https://observer.com/wp-content/uploads/sites/2/2024/10/igor-omilaev-eGGFZ5X2LnA-unsplash.jpg?resize=1920,1600 1920w, https://observer.com/wp-content/uploads/sites/2/2024/10/igor-omilaev-eGGFZ5X2LnA-unsplash.jpg?resize=50,42 50w" sizes="(max-width: 600px) 300px, 620px" /><figcaption id="caption-attachment-1460373" class="wp-caption-text">GPU rentals allow small companies to access<span style="font-weight: 400"> high-performance A.I. chips for specific projects.</span> <span class="media-credit">Igor Omilaev/Unsplash</span></figcaption></figure> <p><span style="font-weight: 400">GPUs, or graphic processing units, have become increasingly difficult to acquire as tech giants like <a href="https://observer.com/company/openai/" title="OpenAI" class="company-link">OpenAI</a> and Meta purchase mountains of them to power A.I. models. Amid <a href="https://observer.com/2024/07/andreessen-horowitz-stocking-ai-chips-win-deals-gpu-shortage/" data-lasso-id="2626741">an ongoing chip shortage</a>, a crop of startups are stepping up to increase access to the highly sought-after A.I. chips—by renting them out. </span></p> <section class="wp-block-observer-newsletters observer-newsletters--in-content"> <form class="newsletters-block__container" method="post" action="#" id="newsletter-6742b01eda6102.13906686" data-form="subscribe-newsletter" data-recaptcha-key="6LexvRggAAAAAF1HvCWrHtG4UAa7m0WIdyIgstAo" data-form-action="https://observer.com/newsletter-subscribe.json"> <div class="observer-newsletters__in-content-icon"> <svg fill="none" xmlns="http://www.w3.org/2000/svg" viewBox="0 0 51 51" width="50" height="50"><path d="M18.124 15.961C23.25 8.783 30.096 4.967 33.682 7.305a4.04 4.04 0 0 1 1.013.97c0 .028 8.3 16.017 8.3 16.017l4.634 2.989a6.39 6.39 0 0 1 1.793 1.732c.472.684.798 1.45.96 2.253.161.804.154 1.63-.02 2.432a6.075 6.075 0 0 1-.995 2.24l-.209.291c-.977 1.355-2.475 2.288-4.17 2.598a6.827 6.827 0 0 1-4.883-.943L32.662 48.32c-1.095 1.285-3.197 2.564-5.792 1.059a3.834 3.834 0 0 1-1.15-1.093 3.63 3.63 0 0 1-.587-1.444 3.763 3.763 0 0 1 .008-1.55 3.85 3.85 0 0 1 .635-1.427l6.556-9.208s-15.5-1.174-15.557-1.196a3.812 3.812 0 0 1-1.35-.552c-1.842-1.19-2.502-3.688-1.865-7.035.573-3.082 2.2-6.572 4.564-9.914Zm29.349 19.182.208-.292c.334-.467.567-.992.687-1.545a4.09 4.09 0 0 0 .012-1.678 4.18 4.18 0 0 0-.665-1.555 4.407 4.407 0 0 0-1.239-1.193l-4.002-2.592-5.282 7.405 4.002 2.592a4.64 4.64 0 0 0 1.624.655c.581.114 1.18.119 1.764.013a4.65 4.65 0 0 0 1.634-.631 4.42 4.42 0 0 0 1.257-1.179Zm-20.03 9.809a1.96 1.96 0 0 0-.324 1.528c.108.53.433.998.904 1.3.472.302 1.05.413 1.608.31A2.158 2.158 0 0 0 31 47.23l7.42-10.405-2.983-1.93-.788-.06-7.205 10.117Zm7.832-12.009 5.757-8.072-5.491-10.657c-.533 2.993-2.091 6.55-4.582 10.04-2.49 3.49-5.386 6.18-8.108 7.758l12.424.931ZM18.188 31.66c2.768-.171 7.275-3.143 11.092-8.497s5.056-10.42 4.205-12.94a2.354 2.354 0 0 0-.877-1.185 2.55 2.55 0 0 0-1.44-.47c-2.746 0-7.42 2.989-11.347 8.497-2.212 3.099-3.823 6.34-4.263 9.175-.863 5.42 2.63 5.42 2.63 5.42Z" fill="#000"/><path d="M25.364 16.165a5.726 5.726 0 0 1 2.148.01c.708.14 1.38.412 1.976.8.11.073.204.166.276.272a.941.941 0 0 1 .14.73.947.947 0 0 1-.158.347.998.998 0 0 1-.285.263 1.047 1.047 0 0 1-.767.133 1.046 1.046 0 0 1-.364-.15 3.572 3.572 0 0 0-1.25-.503 3.648 3.648 0 0 0-1.355-.01 3.574 3.574 0 0 0-1.257.486c-.381.238-.71.546-.966.906s-.436.763-.528 1.189a3.152 3.152 0 0 0-.01 1.29c.086.427.26.834.51 1.197.25.363.574.675.952.92a.972.972 0 0 1 .382.48c.07.194.074.405.01.602a.969.969 0 0 1-.37.49 1.048 1.048 0 0 1-.601.186 1.026 1.026 0 0 1-.58-.165 5.305 5.305 0 0 1-2.01-2.363 4.999 4.999 0 0 1-.29-3.028 5.165 5.165 0 0 1 1.527-2.67 5.592 5.592 0 0 1 2.83-1.412h.04Zm-8.491-6.914h-.098c-.25 0-.493-.088-.679-.248a.95.95 0 0 1-.329-.617l-.782-7.234a.919.919 0 0 1 .21-.725c.083-.1.188-.185.306-.247a1.05 1.05 0 0 1 1.14.105.974.974 0 0 1 .36.668l.776 7.24a.933.933 0 0 1-.222.707c-.17.199-.414.325-.682.351ZM3.771 7.763c.149-.214.38-.363.644-.414.264-.052.538-.002.764.138l7.06 4.41a.974.974 0 0 1 .396.482.922.922 0 0 1 .014.611.969.969 0 0 1-.376.496 1.05 1.05 0 0 1-.613.182 1.07 1.07 0 0 1-.58-.155l-7.06-4.41a.961.961 0 0 1-.415-.622.928.928 0 0 1 .166-.718ZM1.61 19.54l8.214-1.406c.265-.045.538.011.759.158.221.146.372.37.42.622a.93.93 0 0 1-.166.723c-.154.21-.389.354-.654.4l-8.207 1.405h-.18c-.258.007-.51-.08-.703-.243A.933.933 0 0 1 .97 19.88a1.03 1.03 0 0 1 .646-.358l-.005.017Z" fill="#000"/></svg> </div> <div class="observer-newsletters__in-content-inner"> <header class="newsletters-block__header"> <h2 class="newsletters-block__title"> Sign Up For Our Daily Newsletter </h2> </header> <div class="newsletters-block__form"> <input type="hidden" name="action" value="subscribe_newsletter"> <input type="hidden" name="newsletters[]" value="newsletter-daily" id="newsletter-daily"> <div class="newsletters-block__fields wp-block-button"> <input class="newsletters-block__input" aria-label="Email Address" placeholder="Email Address" type="email" name="email" required=""> <button class="wp-block-button__link in_article_single_newsletter_button" type="submit"> Sign Up </button> </div> <p class="newsletter-block__success"> Thank you for signing up! </p> <p class="newsletter-block__error"></p> <p class="newsletters-block__disclaimer"> By clicking submit, you agree to our <a href="http://observermedia.com/terms">terms of service</a> and acknowledge we may use your information to send you emails, product samples, and promotions on this website and other properties. You can opt out anytime. </p> </div> <a href="https://observer.com/subscribe/" class="newsletters-block__see-all in_article_single_newsletter_see_all_link"> See all of our newsletters </a> </div> </form> </section> <p><span style="font-weight: 400">The GPU rental market is part of a niche, existing industry known as GPU-as-a-service where chip owners use an online marketplace to sell compute power to clients over fixed periods of time through the cloud. Typically, companies turn to major cloud providers like <a href="https://observer.com/company/amazon-web-services/" title="Amazon Web Services" class="company-link">Amazon Web Services</a>, Microsoft Azure and Google Cloud—which collectively hold a </span><a target="_blank" target="_blank" rel="noopener" href="https://www.canalys.com/newsroom/worldwide-cloud-services-q2-2024" data-lasso-id="2626742"><span style="font-weight: 400">63 percent market share</span></a><span style="font-weight: 400"> of the global cloud computing market—</span><span style="font-weight: 400">to run A.I. workloads on their on-premise data centers. </span></p><div data-ad="1" class="ad-wrapper ad-top-margin ad-has-disclaimer ad-incontent ad-mobile htlad-observer_article_instream_mobile_1" id="observer_article_instream_mobile_1"></div><div class="ad-wrapper ad-top-margin ad-desktop ad-has-disclaimer ad-incontent htlad-observer_article_instream_dsk_1" id="observer_article_instream_dsk_1"></div> <p><span style="font-weight: 400">GPU-as-as-service, however, provides a more decentralized approach. Providers in that space partner with data centers and GPU owners globally to rent their clusters of chips to clients whenever the need arises. Renting computer power allows organizations with tight budgets, such as startups and academic institutions, access to high-performance GPUs for specific projects, said <a href="https://observer.com/person/david-bader/" title="David Bader" class="company-link">David Bader</a>, director of the Institute for Data Science at the New Jersey Institute of Technology. </span></p> <p><span style="font-weight: 400">“GPU-as-a-service has significantly leveled the playing field in A.I. and high-performance computing,” Bader told Observer. “Instead of making substantial upfront investments in hardware that quickly depreciates and becomes obsolete, companies can now access GPU power on-demand.”</span></p> <p><span style="font-weight: 400">Even as supply chain constraints around GPUs start to ease, the rental market continues to grow</span>.<span style="font-weight: 400"> The GPU-as-a-service market, valued at $3.79 billion as of 2023, is expected to <a target="_blank" target="_blank" rel="noopener" href="https://www.grandviewresearch.com/industry-analysis/gpu-as-a-service-gpuaas-market-report" data-lasso-id="2626743">grow 21.5 percent annually to $12.26 billion</a> by 2030 as the demand for advanced data analytics, like running machine learning algorithms, increases, according to data from </span><span style="font-weight: 400">Grand View Research</span><span style="font-weight: 400">. </span></p> <h3><b>Generative A.I. has spurred interest in GPU rentals</b></h3> <p><span style="font-weight: 400">Some startups in the GPU rental space</span> <span style="font-weight: 400">have seen demand surging since</span> <span style="font-weight: 400">ChatGPT came out in November of 2022 as companies seek out compute power to build A.I.</span></p><div data-ad="1" class="ad-wrapper ad-top-margin ad-has-disclaimer ad-incontent ad-mobile htlad-observer_article_instream_mobile_2" id="observer_article_instream_mobile_2"></div><div class="ad-wrapper ad-top-margin ad-desktop ad-has-disclaimer ad-incontent htlad-observer_article_instream_dsk_2" id="observer_article_instream_dsk_2"></div> <p><span style="font-weight: 400"><a href="https://observer.com/person/jake-cannell/" title="Jake Cannell" class="company-link">Jake Cannell</a>, founder and CEO of Vast.ai, said his company’s customers were primarily cryptocurrency miners before the generative A.I. hype began. Today</span>,<span style="font-weight: 400"> more than half of the projects run on Vast.ai’s GPU rentals are A.I.-related. Clients include A.I. entrepreneurs, startups and academics building custom large language models with foundational models like OpenAI’s GPT</span> <span style="font-weight: 400">and deploying LLMs on A.I.-related workloads like A.I.-image generator Stable Diffusion, Cannell said. </span></p> <p><span style="font-weight: 400">The release of ChatGPT, combined with high demand for major cloud providers and the GPU shortage, pushed more customers to look for alternative options, which has in part accelerated demand for Vast.ai’s GPU rentals, according to Cannell. “That’s probably relaxed a bit now that production has caught up, but demand still seems really high and growing,” the CEO said.</span></p> <p><a href="https://observer.com/company/nvidia/" title="Nvidia" class="company-link">Nvidia (NVDA)</a> CEO<span style="font-weight: 400"> Jensen Huang recently said </span><a target="_blank" target="_blank" rel="noopener" href="https://www.cnbc.com/2024/10/03/nvidia-ceo-demand-for-blackwell-ai-chip-is-insane.html" data-lasso-id="2626744"><span style="font-weight: 400">demand for Nvidia’s new Blackwell chips has been “insane</span></a><span style="font-weight: 400">” and that the company, </span><span style="font-weight: 400">which owns about 90 percent of the GPU market, plans to ramp up Blackwell production this year through 2026. </span></p> <p><span style="font-weight: 400">Launched in 2017, Vast.ai</span> <span style="font-weight: 400">is behind an online marketplace that connects owners of GPU clusters from Nvidia and AMD with organizations looking to rent compute power. </span><span style="font-weight: 400">As of late October, the marketplace offers 109 clusters of GPUs—including Nvidia’s popular H100 chips—housed in data centers and, in some cases, the owners’ garages scattered across the U.S. Europe, Asia and Australia, according to Cannell.</span></p><div data-ad="1" class="ad-wrapper ad-top-margin ad-has-disclaimer ad-incontent ad-mobile htlad-observer_article_instream_mobile_3" id="observer_article_instream_mobile_3"></div><div class="ad-wrapper ad-top-margin ad-desktop ad-has-disclaimer ad-incontent htlad-observer_article_instream_dsk_3" id="observer_article_instream_dsk_3"></div> <p><span style="font-weight: 400">By offering GPU clusters with different capacities, speeds and system requirements for various lengths of time, Vast.ai aims to provide renters with the freedom to pick GPUs required for specific projects and scale up-and-down depending on their need. For instance, a client developing an A.I. chatbot may initially rent 100 GPUs to train their model. If their product takes off, the client could ramp up their compute capacity by renting out thousands of GPUs. The flexibility to access different amounts of compute at different stages of product development, the company claims, is what makes GPU rentals over purchasing chips appealing.</span></p> <p><span style="font-weight: 400">“Buying would only make sense if you have a much more predictable, steady demand for GPUs over a very long period of time,” Cannell said. “Only the hypercalers can formulate that,” referring to industry giants like OpenAI. </span></p> <p><span style="font-weight: 400">While startups like Vast.ai launched prior to ChatGPT are seeing an uptick in interest, new startups have emerged following the chatbot’s release to tap into the growing GPU rental market. </span></p> <p><span style="font-weight: 400">Foundry, a GPU marketplace built specifically for A.I. workloads, claims it has attracted “dozens” of customers since it launched its cloud platform in August and</span> <span style="font-weight: 400">can significantly reduce compute costs by tapping into the excess power supply of pre-existing chips, according to CEO Jared Quincy Davis. </span></p><div data-ad="1" class="ad-wrapper ad-top-margin ad-has-disclaimer ad-incontent ad-mobile htlad-observer_article_instream_mobile_4" id="observer_article_instream_mobile_4"></div><div class="ad-wrapper ad-top-margin ad-desktop ad-has-disclaimer ad-incontent htlad-observer_article_instream_dsk_4" id="observer_article_instream_dsk_4"></div> <p><span style="font-weight: 400">The startup, which raised $80 million from investors like Sequoia and Lightspeed Ventures as of March, rents out GPUs through a mix of compute clusters the company owns and “underutilized clusters” sourced from partnerships with data centers. </span></p> <p><span style="font-weight: 400">Foundry’s customers include companies in the technology, telecommunications, media and health care industries. Foundations and academic labs also use Foundry’s services. Common use cases include fine-tuning models like Meta’s Llama to exhibit desirable properties, building neural networks from scratch, and performing sentiment analyses—a deep learning technique used to analyze text to determine its emotional tone. Foundry even has clients renting GPUs to predict protein sequences for drug discovery, train models to translate rare languages, and build A.I. agents that can control websites without human intervention.</span></p> <p><span style="font-weight: 400">“Much of the cutting-edge development that could previously only be conducted by labs like OpenAI and <a href="https://observer.com/company/deepmind/" title="DeepMind" class="company-link">DeepMind</a> will now be obtainable by others as Foundry makes GPU compute more accessible and affordable,” Davis, who previously worked at Google DeepMind as an engineer, told Observer. </span></p> <p><span style="font-weight: 400">Some organizations are seeing the benefits of GPU rentals materialize. Bader, the professor at New Jersey Institute of Technology, said he’s seen his university use the GPU rental approach to “free up resources” for “critical activities” like research and development. The GPU rental model, he claims, is ideal for projects with “temporary” or “seasonal compute needs” and “eliminates the burden” of costly hardware management and maintenance. Bader said he has also</span> <span style="font-weight: 400">seen small businesses the university collaborates with access the same GPU power as larger businesses. </span></p><div data-ad="1" class="ad-wrapper ad-top-margin ad-has-disclaimer ad-incontent ad-mobile htlad-observer_article_instream_mobile_5" id="observer_article_instream_mobile_5"></div><div class="ad-wrapper ad-top-margin ad-desktop ad-has-disclaimer ad-incontent htlad-observer_article_instream_dsk_5" id="observer_article_instream_dsk_5"></div> <p><span style="font-weight: 400">“I’ve witnessed countless startups benefit from this,” Bader said. “They no longer need millions in upfront investment for specialized hardware. Instead, they can prototype, test and iterate their algorithms using rented GPUs, ensuring that funds are directed towards development rather than infrastructure.” </span></p> <h3><b>Renting out GPUs may not save that much money long-term</b></h3> <p><span style="font-weight: 400">Still, Bader noted that renting out GPUs over purchasing them comes with some trade-offs. </span></p> <p><span style="font-weight: 400">Performance on shared infrastructure can be inconsistent, which could slow down the execution of tasks like A.I. model training if there’s service disruptions. GPU rentals could also get expensive down the line despite upfront cost savings. The costs of transferring data between the cloud and the company could “add up quickly,” and for workloads that require real-time processing, clients that continuously hit latency issues might end up paying more than if they owned GPUs, according to Bader. The lack of control over the infrastructure could also be “problematic” for companies with strict security and compliance protocols. </span></p> <p><span style="font-weight: 400">The future of the GPU rental market could also depend on how the chip industry evolves. After all, major cloud providers like Amazon Web Services are expected to <a href="https://observer.com/2023/11/microsoft-ceo-satya-nadella-unveils-the-companys-first-in-house-a-i-chip/" data-lasso-id="2626745">continue expanding their product lines</a> and are likely to absorb</span> <span style="font-weight: 400">smaller companies, which could lower prices in the short term and limit consumer choice in the long run, according to Bader. Plus, supply chain delays could make it harder for cloud giants to get their hands on GPUs.</span></p><div data-ad="1" class="ad-wrapper ad-top-margin ad-has-disclaimer ad-incontent ad-mobile htlad-observer_article_instream_mobile_6" id="observer_article_instream_mobile_6"></div><div class="ad-wrapper ad-top-margin ad-desktop ad-has-disclaimer ad-incontent htlad-observer_article_instream_dsk_6" id="observer_article_instream_dsk_6"></div> <p><span style="font-weight: 400">Despite these concerns, the startups that spoke to Observer remain confident there will still be a need for their services in the following years as A.I. continues to grow. Vast.ai continues to improve its GPU matchmaker service and is getting more directly involved in use cases like LLM inference, especially for A.I. agents. Foundry plans to release additional features to increase the accessibility for its platform and make it more useful for A.I. developers to build advanced models. </span></p> <p><span style="font-weight: 400">“Nvidia is still a leader, and I don’t see that changing overnight, but there is increasingly more competition,” Vast.ai CEO Cannnell said. </span></p> </p> <img itemprop="image" src="https://observer.com/wp-content/uploads/sites/2/2024/10/igor-omilaev-eGGFZ5X2LnA-unsplash.jpg?quality=80&w=970" alt="Amid an A.I. 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